German and Greek rightwing extremists have been forging close contacts in Germany in an attempt to strengthen their power base in Europe, according to German officials.

Members of the Greek neo-Nazi party Golden Dawn are believed to have set up a cell in the southern German city of Nuremberg with the aim of recruiting young Greeks who have flocked to the country in search of work.

Greek community leaders in Germany have condemned the arrival of the party, also known as Chrysi Avgi, and called on authorities to clamp down on a group that they said had shown its readiness to use violence in Greece and could attempt to do the same in Germany.

Golden Dawn, which has close to 20 seats in the Greek parliament, has described the move on its website as the "answer of expat Greeks to the dirty hippies and the regime of democratic dictatorship in our homeland".

In a statement, the Bavarian office for the protection of the constitution said: "We are keeping an eye on developments."

It said Golden Dawn had "an international network of contacts, including contacts with neo-Nazis in Bavaria. These contacts are cultivated via mutual visits as well as at meetings at rightwing extremist events in Europe."

It confirmed that members of Golden Dawn and far-right German groups had organised reciprocal visits to each other's countries as well as meeting at rightwing extremist meetings outside Germany and Greece.

In Greece, Golden Dawn denied it had established links with neo-nazi groups in Germany. "All this [talk] about neo –nazis is nonsense," said Golden Dawn's spokesman, Ilias Kasidiaris.

But Kasidiaris, who shot to notoriety last year when he assaulted two leftwing MPS during a live TV debate, confirmed that the far rightists had set up a "local organisation" in Germany. "Simply there is a big community, a big colony of [ethnic] Greeks in Germany and for that reason the People's Association - Golden Dawn - decided to [set up] a local organisation in Germany too."

Expat Greeks, he insisted, were showing "mass support for the efforts of Golden Dawn, not just in Germany but wherever there are diaspora Greeks".

In an open letter, the Greek community of Nuremberg said it "condemned unanimously and categorically" the establishment of the Golden Dawn cell.

"Racist slogans, messages of intolerance as well as the stoking of anti-foreigner sentiment, divisions and fears, have no place in the Greek community," the group wrote.

It added that it believed Golden Dawn had chosen the southern German city because of its historical links with Adolf Hitler's Nazi party. Hitler chose to stage Nazi party rallies in the city due to its connections to the Holy Roman Empire and the Nuremberg laws, which stripped Jews of their German citizenship, were passed here.

"The attempt of this party to bind itself to the history of this city is blasphemous and condemned to failure," it said.The leader of the Federation of Greek Communities in Germany, Sigrid Skarpelis-Sperk, told the Guardian: "The German authorities should be alarmed at this development and should be very thorough in monitoring them, to keep them in check.""A party that has shown itself willing and able in Greece to carry out aggressive attacks on people with dark skin and foreigners, to deliver blows to politicians in public, is capable of behaving the same way in Germany," she said.

An estimated 380,000 Greeks live in Germany, mainly in the industrial Ruhr valley, though the actual figure, as – many do not register with the authorities – is believed to be nearer 900,000. Roughly-speaking in modern times they have come in three waves – after the second world war and then during the Greek dictatorship, when many Greek communists were given refuge, particularly in East Germany. The third wave is occurring now as many, particularly young Greeks, come to Germany looking for work and to escape unemployment at home.German neo-Nazi groups, such as the Bavarian-based Freies Netz Süd, have been following the political successes of Chrysi Avgi for some time, making open reference to the Greek party on their websites.

The anti-Nazi organisation Nuremberg Union Nazi Stop said it would be monitoring Golden Dawn's activities in Germany.

Over the past months Golden Dawn, which is widely considered to be racist and antisemitic, has been held responsible for numerous attacks on foreigners in Greece. The party, whose symbol resembles the swastika, won 18 parliamentary seats in last year's election. Its popularity currently stands at around 12%.